Part One: In 2011, Hannah Summit opened Hannah's Pets, a small retail shop selling pet supplies. On December 31, 2011, her accounting records show the following:
Inventory on December 31, 2011....................................................................... $10,250
Inventory on January 1, 2011...............................................................................15,000
Sales revenue........................................................................................................54,000
Utilities for shop.....................................................................................................2,450
Rent for shop..........................................................................................................4,000
Sales commissions...................................................................................................2,300
Purchases of merchandise.....................................................................................27,000
Requirement
Prepare an income statement for Hannah's Pets, a merchandiser, for the year ended
December 31, 2011.
Part Two: Hannah's Pets was so successful that Hannah decided to manufacture her own brand of pet toys-Best Friends Manufacturing. At the end of December 2012, her accounting records show the following
Work in process inventory, December 31, 2012..........................................................$ 720
Finished goods inventory, December 31, 2011...............................................................0
Finished goods inventory, December 31, 2012............................................................5,700
Sales revenue...........................................................................................................105,000
Customer service hotline expense................................................................................1,000
Utilities for plant..........................................................................................................4,600
Delivery expense.........................................................................................................1,500
Sales salaries expense.................................................................................................5,000
Plant janitorial services...............................................................................................1,250
Direct labour.............................................................................................................18,300
Direct material purchases.........................................................................................31,000
Rent on manufacturing plant.....................................................................................9,000
Raw materials inventory, December 31, 2011........................................................13,500
Raw materials inventory, December 31, 2012..........................................................9,275
Work in process inventory, December 31, 2011.............................................................0
Requirements
1. Prepare a schedule of cost of goods manufactured for Best Friends Manufacturing for the year ended December 31, 2012.
2. Prepare an income statement for Best Friends Manufacturing for the year ended
December 31, 2012.
3. How does the format of the income statement for Best Friends Manufacturing differ from the income statement of Hannah's Pets?
Part Three: Show the ending inventories that would appear on these balance sheets:
1. Hannah's Pets at December 31, 2011
2. Best Friends Manufacturing at December 31, 2012